Authorised Dealer Not Liable To Pay Service Tax On Incentives Out Of Dealership Agreement: CESTAT

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the authorized dealer was not liable to pay service tax on various incentives that it received from Tata as per the dealership agreement.The two-member bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that as per the dealership agreement, the appellant or dealer has to purchase vehicles from Tata Motors and then sell them. If it meets the targets, it gets additional incentives. The incentives are in the form of a trade discount. Trade discounts can take many forms, such as cash discounts, quantity discounts, year-end discounts, etc. These incentives are in the form of year-end discounts. This is an incentive given to encourage the dealer to buy and sell a larger number of vehicles. It is not a payment for any service rendered to the manufacturer. In the market, buyers who purchase larger quantities of any good often get a better price.The appellant/dealer was registered with the Service Tax Department under the categories of business auxiliary services, Authorized Service Station Services, and Renting of immovable property. It is the authorized dealer of Tata Motors Ltd. for the sale, service, and supply of spare parts for medium and heavy commercial vehicles in five districts of Rajasthan.The appellant was purchasing vehicles from Tata on its own account and thereafter selling them to the customers. On sales, the appellant was paying value-added tax. According to the appellant, the dealings between Tata and itself were on a principal-to-principal basis. However, if the appellant met specific sales targets, various incentives were available to the appellant as per the policy of the Tata Group.The appellant submitted that incentives received by dealers from automobile manufacturers for meeting sales targets are in the nature of trade discounts and are not exigible to service tax.The issue raised was whether the appellant was liable to pay service tax on various incentives, which it received from Tata as per the dealership agreement.The tribunal held that the demand on the incentives received by the appellant is not exigible to service tax.Case Title: M/s Veer Prabhu Marketing Ltd. Versus Commissioner of Central ExciseCitation: Service Tax Appeal No. 53434 Of 2015Date: 06.02.2023Counsel For Appellant: CA O.P. AgarwalCounsel For Respondent: Authorized representative Harsh VardhanClick Here To Read The Order

Authorised Dealer Not Liable To Pay Service Tax On Incentives Out Of Dealership Agreement: CESTAT

Mariya Paliwala

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Mariya Paliwala

Authorised Dealer Not Liable To Pay Service Tax On Incentives Out Of Dealership Agreement: CESTAT

Mariya Paliwala

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Mariya Paliwala

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